Standard Bank Group in US$150m deal to build wind power project in Kenya

Standard Bank Group and its subsidiary CfC Stanbic Bank in Kenya, have signed a ground-breaking deal with independent power producer Aeolus Kenya (AKL), to build a US$150-million wind power plant in Kenya. The plant will be largest wind power generation farm in sub-Saharan Africa to date.
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Aeolus Kenya is an independent power producer and a member of the Power Africa initiative led by the United States' President Barack Obama. Power Africa is developing 1GW of wind, geothermal and gas fired power projects in the East African region. AKL's landmark project the 60.8MW Kinangop Wind Park is its first in a strategic pipeline of projects.

Kinangop Wind Park will add a further 60MW to Kenya's 1,672MW national power grid. The 60MW wind power plant will provide electricity to 150,000 Kenyan households. The wind power plant which will be built in Kinangop Plateau in central Kenya.

According to Kwame Parker, Standard Bank Group's East Africa Head of Debt Solutions and Infrastructure Finance, the transaction will be fully funded through a combination of debt and equity. Standard Bank Group is the lead arranger and will underwrite US$90-million of the debt, while Norway's Norfund and a large Africa-focused international infrastructure investor will provide US$60-million in equity. Financial close is expected in the next three weeks, and syndication of the debt is now underway.

“With the rising demand for electricity in Kenya, this project will go a long way in providing cost-effective power to the economy. It is a good example of how to successfully bring private players into the renewable energy sector and serves as a good vote of investor confidence in the Kenyan economy,” Mr Parker says.

Kenya, East Africa's largest economy, relies heavily on hydro-electric dams for power, which is often challenged in times of reoccurring drought.

“The project is designed to provide a clean source of electricity to Kenya. It will not only contribute to the social and economic development of Kenya, but will also significantly help ease the energy supply deficit that the country is grappling with. It provides a perfect opportunity for Kenya to increase the production of clean energy and reduce heavy reliance on other sources of power,” says Mr Parker.

The plant is expected to come on line in mid-2015. The Kenyan government will be the main buyer of the power produced. Aeolus Kenya has already signed a power purchase agreement with state utility Kenya Power.

“What makes this deal significant is that it is a collaboration of players in various sectors combining their skills in order to meet Kenya's growing demand for electricity. It's been a complex deal, but we are delighted that all our efforts have yielded a positive outcome for Kenya and its ongoing efforts to improve energy security. Standard Bank's on-the-ground expertise and its global support network have been able to provide the necessary skills and capital to support a project of this nature and magnitude.”

Although this is the first deal that Standard Bank Group has concluded in the renewable energy sector in East Africa, it has opened the way for similar deals in the region as investors are increasingly looking at renewable sources to help boost power supply.

“On the back of the success of this deal, Standard Bank has signed mandates to develop other wind farms in Kenya some of which are going to be larger in size. There are also significant opportunities to finance renewable projects in the hydro and geothermal energy sectors in East Africa. There is a growing interest in renewable energy in the region and Standard Bank is positioned to play a major role in this sector,” says Mr Parker.

The wind project has also been registered under the United Nations' Clean Development Mechanism.